Health Care

Why Red States Will Expand Medicaid, Like It or Not


President Barack Obama speaks at Temple Emanu-El Nov. 6, 2013 in Dallas

Photograph by Brendan Smialowski/AFP via Getty Images

President Barack Obama speaks at Temple Emanu-El Nov. 6, 2013 in Dallas

Well more than half of Californians who were uninsured last year got health coverage in 2014, according to a new report from the Kaiser Family Foundation. The health research group estimates that 3.4 million people in the state who didn’t have health coverage in 2013 now do. The biggest gains—a quarter of the newly insured—got coverage through California’s expansion of Medicaid, the federal-state insurance for the poor.

Kaiser Family Foundation

Across the country, the bulk of uninsured adults now live in states that didn’t expand Medicaid eligibility, a separate report from the Urban Institute this week shows. Insurance coverage in mostly blue states, such as California, that embraced Obamacare is diverging from the rates in mostly red states that didn’t. In Medicaid expansion states, about one in 10 adults under 65 are uninsured. The rate is nearly double in states that didn’t expand the program, according to the Urban Institute:

That split has big consequences for health-care providers and patients in the years ahead. A single person earning $15,000 a year can get Medicaid in California but not in Texas. If that person gets hit by a car and goes to the emergency room, the California hospital gets paid and the one in Texas doesn’t. The Texas hospital may charge higher rates to its insured patients to make up for the uncompensated care.

Some history: Before Obamacare, most state Medicaid programs were restricted to narrow categories of needy patients—children and pregnant women, for example. The Affordable Care Act was intended to expand states’ programs to cover anyone, including childless adults, who earned up to a certain income threshold, about about $15,900 for individuals, or $32,900 for a family of four. People who earned more than that could get subsidies for private coverage, and Medicaid would catch everyone else who couldn’t afford a health plan on their own.

Urban Institute

The Supreme Court made the Medicaid expansion optional, and 24 states are opting out, at least for now. That creates a coverage gap for people too poor to get Obamacare subsidies but not poor enough to get Medicaid under the old criteria.

The federal government will pay for 100 percent of the expanded Medicaid through 2016 and at least 90 percent after that. Yet many red-state lawmakers don’t want to take the deal, especially in areas where Tea Party groups are threatening to unseat Obamacare supporters—including those who favor Medicaid expansion. Some governors are a little more practical. Indiana’s Mike Pence, a possible GOP presidential contender, is trying to thread the needle of opposing Obamacare but taking federal money to expand coverage to the poor through privately managed care plans.

Health-care consultant Decision Resources Group predicted in a recent report that “most, if not all, states will move toward Medicaid expansion in the next few years—though it won’t be without political bumps in the road.” Other Republican governors are taking unusual approaches to widening eligibility for Medicaid. In Michigan, Rick Snyder’s plan requires some recipients to contribute to health savings accounts. Iowa is using federal funds to help Medicaid-eligible patients buy private coverage on the exchange, an idea that began in Arkansas, a conservative state led by Democrat Mike Beebe. Other states are discussing similar workarounds with the feds.

Don’t expect it to happen before this year’s midterm elections, but watch for more GOP-controlled statehouses to try similar maneuvers. Hospital lobbyists generally have the ear of governors, and they want Medicaid expanded. The insurance industry might embrace Republican efforts to funnel the expansion through private plans, says Paul Keckley, a Nashville-based managing director of health care at consultant Navigant.

With the expansion funded by federal money, taxpayers in states that don’t broaden coverage are already subsidizing poor people’s health care—just in other states, Keckley notes. “Would a Republican governor leave 100 percent funding for three years [on the table] and say it ended up in New York?” he asks. “That kind of stings in the South.”

John_tozzi
Tozzi is a reporter for Bloomberg Businessweek in New York.

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